A California Appellate Court recently clarified the burden of proof for an insurance company seeking contribution from another insurance company in settlement of a construction defect action. When a company involved in construction is sued for allegedly causing property damage to the building or structure it built (i.e. a construction defect), the company typically turns to its commercial general liability insurance policy. Depending on the nature of the defect claim the construction company may have more than one policy that could potentially provide coverage. Different insurance carriers may respond to their insured’s tender in different ways. When one carrier agrees to defend and indemnify its insured from a claim potentially covered by another carrier, but the second carrier refuses to cover, the first might settle the claim and then seek a court ruling that the second provide “equitable contribution” to the settlement amount paid. In that situation, what does the settling carrier have to show? That the claim was absolutely and certainly with in the coverage of the second insurance policy?
Continue Reading A Construction Defect Insurance Carrier Need Only Demonstrate That Another Insurance Carrier’s Policy May Potentially Cover The Claim In Order To Recover Equitable Contribution To A Settlement

This article is the seventh in a series summarizing construction law developments for 2010.

By Candace Matson, Harold Hamersmith & Helen Lauderdale

  1. Forecast Homes, Inc. v. Steadfast Insurance Co., 181 Cal. App. 4th 1466 (4th Dist. Jan. 2010), rev. denied, 2010 Cal. LEXIS 4356

A home developer, acting as a general contractor, hired subcontractors to build homes. The subcontracts all required the subcontractors to defend and hold the developer harmless against any liability arising out of their work and to add the developer to their commercial general liability policies as an additional insured. A construction defect litigation was brought against the developer, but not against the subcontractors. The developer tendered its defense to Steadfast Insurance Company, which insured many of the subcontractors and on whose policies the developer was an additional insured. The insurer refused the tender, maintaining that only the named insured subcontractors could satisfy the per occurrence self-insured retention ("SIR") amounts and none of the subcontractors had done so because they did not incur defense or indemnity costs in the litigation.
 Continue Reading The Year 2010 In Review: Construction Insurance Issues

By Edward B. Lozowicki and James G. Higgins

Owners, developers and major general contractors are ramping up their use of wrap-up insurance policies on building and industrial projects. When sponsored by an Owner, wrap-ups are dubbed  Owner-Controlled Insurance Program ("OCIPs"). If the general contractor sponsors the wrap-up, it is termed a Contractor Controlled Insurance Program ("CCIPs"). These policies offer significant cost savings to owners and generals. Traditionally, bid packages required the general contractor and its subcontractors each to carry liability insurance and to indemnify the Owner and name it as an additional insured. This arrangement has been criticized as requiring costly duplication of coverage, and causing needless litigation over indemnity rights. Wrap-ups seek to avoid these consequences by affording liability coverage to all participants on a project under a single policy. However there have been problems with wrap-ups such as inadequate policy limits and gaps in coverage. And the controversy over contractual indemnity clauses continues.
 Continue Reading New Legislation on Wrap-up Insurance And Indemnity Clauses

The Fifth Day, LLC v. James P. Bolotin, et al., ___ Cal.App.4th ___(March 27, 2009, No KC047712)

By Jon E. Maki & Bram Hanono

The California Court of Appeal for the Second Appellate District determined that an entity which provided construction management services to a private owner developing commercial real property was not required to be licensed as a contractor pursuant to the Contractors’ State License Law ("CSLL") (opinion by Acting Presiding Justice Armstrong, concurrence by Justice Krieger). In a lengthy dissent, Justice Mosk disagreed, highlighting that the intent of the CSLL is to protect consumers from unqualified and unlicensed contractors and predicted that the decision on a case of first impression creates a loophole in the license requirements by allowing unlicensed contractors to call themselves "construction managers."Continue Reading Construction Manager Not Required To Be Licensed Pursuant To The Contractors’ State License Law

New Legislation Creates Additional Carve-out

by Candace Matson 

Legislation effective January 1, 2006 (AB 758), amending California Civil Code §2782, creates a further exception to parties’ ability to negotiate indemnity terms in construction agreements. AB 758 has been touted as addressing the “insurance crisis” of residential subcontractors. Some opine that, viewed in conjunction with SB 800 (Civil Code, Title 7, “Requirements for Actions for Construction Defects”), it prohibits builders from pushing down their strict liability obligations onto subcontractors through indemnity agreements. Others maintain that it basically deals with an issue of fairness, i.e., whether liability is fairly imposed on subcontractors.Continue Reading New Legislation Affects Allocation of Risk in Residential Construction Contracts

McCrary Construction Company v. Metal Deck Specialists, Inc., California Court of Appeal, First Appellate District, November 14, 2004

In McCrary, a general contractor sought indemnity from two of its subcontractors for damages arising from the death of a construction worker who fell through a hole in the metal roof of the project. One subcontractor, Metal Deck Specialists, Inc., was responsible for installing the metal deck system on the roof, and had cut the hole in the roof and left it uncovered. The other subcontractor, Horizon Sheet Metal Co., covered the hole with plywood at the request of the general contractor, but failed to secure the plywood to the metal decking. The accident occurred when the worker lifted the plywood up, and not realizing there was hole beneath it, stepped into the hole and fell to his death.
Continue Reading Court Of Appeal Holds General Contractor Is Not Entitled To Indemnity From Subcontractors Under General Indemnity Clause Because General Contractor Was Actively Negligent

Safety is important to all of us, but did you know you could be subject to criminal penalties, as well as civil penalties, for violating standards set by the California Occupational Safety and Health Administration (OSHA)? These penalties include prison sentences of up to four years and up to $3.5 million in fines.

The following information, derived from Sections 6423 and 6425 of the California Labor Code and from Section 192 of the California Penal Code, is designed to give you a general overview of the penalties you could receive for committing violations of OSHA guidelines. It does not constitute legal advice! Due to the serious nature of the penalties that may be incurred for such violations, you should consult with legal counsel for further guidance and clarification.
Continue Reading Criminal Penalties For Violating OSHA Standards